Buy 3 Compelling Biotech Stocks at Bargain Prices

Democratic Presidential candidate Hillary Clinton's "price gouging" tweet last week triggered a major sell-off in the biotech sector. With most biotech companies trading in the red since then, the NASDAQ Biotechnology Index and NYSE ARCA BIOTECH INDEX plunged 18.3% and 16.1%, respectively.

After Turing Pharmaceuticals hiked the price of its anti-parasitic drug Daraprim to $750 from $13.50 per tablet, Clinton tweeted that " Price gouging like this in the specialty drug market is outrageous. Tomorrow I'll lay out a plan to take it on. -H." This set the snowball rolling (read more: 5 Biotech Stocks Hit Hard by Hillary Clinton's Tweet ).

Pricing Concerns

Pricing concerns in the biotech sector are not new. High prices of biotech drugs have been on and off the limelight for some time now. Toward the end of last year, the sector had witnessed another sell-off when pharmacy benefit manager Express Scripts ESRX entered into an agreement with AbbVie Inc. ABBV , adding the latter's lower priced Viekira Pak to its formulary, as an exclusive option for patients suffering from genotype 1 hepatitis C virus (HCV) infection. The PBM removed Gilead Sciences Inc.'s GILD high-priced Sovaldi and Harvoni and Johnson & Johnson's JNJ HCV drug Olysio from its National Preferred Formulary.

In the meantime, the first biosimilar, Zarxio, was launch by Sandoz, a Novartis NVS company, in the U.S. Zarxio is a biosimilar version of Amgen's AMGN blockbuster drug, Neupogen. With several other companies including Pfizer Inc. PFE , which acquired biosimilar maker Hospira, looking to introduce biosimilar drugs in the U.S., fresh bouts of speculation about pricing of branded drugs are not uncommon.

Trend Reversal in the Cards?

Despite conjectures and suppositions doing the rounds, the fundamental strength of the biotech sector remains intact. Product approvals, encouraging pipeline updates and a flurry of M&A activity should continue to make biotech a lucrative option. There are several catalysts that could lead to a trend reversal in the sector.

We have identified stocks that are trading below their inherent value. We have also narrowed down our choices with the help of the new Style Score System selecting stocks with a Value Style Score of "A" or "B," which when combined with a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy) offer good investment opportunities.

These are stocks that have witnessed price depreciation last week in spite of their strong fundamentals. These attractive value stocks are trading at a bargain price and could fetch higher returns on market correction.

3 Cheap Value Picks

Our first pick is of course Amgen , a leading biotech company with a strong presence in the supportive cancer care, nephrology and autoimmune disease markets. Amgen's portfolio includes Enbrel, Kyprolis, Sensipar, Prolia and Xgeva among others. The company's PCSK9 inhibitor Repatha for cholesterol management is approved in both the U.S. and EU and has blockbuster potential.

This Thousand Oaks, CA-based company carries a Zacks Rank #2. The company has seen its price fall 12.2% since Clinton's tweet. Amgen currently has a Value Style Score of B.

Our second pick is Anika Therapeutics Inc.ANIK . The Bedford, MA-based company is focused on developing and commercializing drugs for products for tissue protection, healing, and repair based on hyaluronic acid. The company markets over 20 products, primarily in Europe.

This Zacks Rank #1 stock has witnessed a price fall of 7.2% since Sep 21. Anika boasts a Value Style Score of A.

PDL BioPharma, Inc.PDLI is also looking attractive with a Zacks Rank #2 and a Value Style Score of A. The stock has fallen 4.7% since the controversy. Headquartered in Incline Village, NV, the company focuses on the management of intellectual property assets. PDL BioPharma is in collaboration with an established player like Roche and receives royalties on sales of humanized antibody products such as Avastin, Herceptin, Xolair, Kadcyla, Perjeta, Tysabri and Actemra.

What's Ahead?

Despite challenges like increasing competition, pricing pressure and the entry of biosimilars in the U.S., we believe that the key fundamentals in the biotech space are still intact. With the upcoming third-quarter earnings season and several product approvals and encouraging pipeline news, biotech remains a very happening corner of the investment world.

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PFIZER INC (PFE): Free Stock Analysis Report

GILEAD SCIENCES (GILD): Free Stock Analysis Report

AMGEN INC (AMGN): Free Stock Analysis Report

EXPRESS SCRIPTS (ESRX): Free Stock Analysis Report

PDL BIOPHARMA (PDLI): Free Stock Analysis Report

NOVARTIS AG-ADR (NVS): Free Stock Analysis Report

JOHNSON & JOHNS (JNJ): Free Stock Analysis Report

ABBVIE INC (ABBV): Free Stock Analysis Report

ANIKA THERAPEUT (ANIK): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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